Friday, November 16, 2012

Hostess Brands Files Bankruptcy

THE UNIONS

There are 12 different unions, with some 15,000 members, 40 separate pension plans, and $2 billion in unfunded pension liabilities. (Whew!) That's what Hostess claims is at the heart of the company's woes. The unions say management was fine with those pensions after the first bankruptcy and may go on strike if they feel they're being made the fall guys in any court-ordered restructuring. That would be the end of Hostess as we know it.

THE PE FIRM

Run by Tim Collins, a financier with Democratic Party connections, private equity firm Ripplewood Holdings acquired control of Hostess as it came out of its first bankruptcy in 2009. Ripplewood pumped a total of $170 million into the company, but the string of CEOs it appointed could not keep Hostess from sliding back into Chapter 11 (cheekily called Chapter 22 in some circles). While it still retains some debt, Ripplewood has little chance of recouping any of its investment.

THE HEDGE FUNDS

Silver Point Capital and Monarch Alternative Capital, hedge funds that specialize in distressed companies, are both said to hold about 30% of Hostess's debt. Sources say their current stake is between $50 million and $100 million apiece, though they originally invested more. The goal now: renegotiate the Teamsters' contract and get out as soon as possible. Or liquidate the company and just take what they can get. As the holders of Hostess's senior secured debt, either way the hedgies will walk away with plenty.

CAKE WRECK: HOSTESS FROM ICON TO BUST

1925: Continental Baking Co. buys Taggart Baking, maker of Wonder Bread. Continental becomes the largest bakery in the U.S.

1930: Continental baker James Dewar gets the idea to make an inexpensive cream-filled sponge cake using strawberry shortcake equipment that sat idle in the off-season. The Twinkie is born.

1930: Wonder Bread becomes the first large-scale baker to sell loaves of presliced bread. The company's advertising is thought to be the origin of the phrase "the greatest thing since sliced bread."

1947: Mascot Twinkie the Kid is introduced.

1947: Hostess introduces white Sno Balls. It takes about three years for the company to add the cream filling and distinctive pink color.

1999: Hillary Clinton approves the inclusion of Twinkies in the Millennium Time Capsule, alongside Ray Charles' sunglasses and a piece of the Berlin Wall. The Twinkies are removed, however, because of rodent concerns.

About Me

As a sponsor, I partner with investors and financial institutions, and invest in lower middle market telecom, tech and logistics companies in the US. My strength lies in reading between the numbers and data. My dual citizenship helps ;) . I'm also an avid blackjack and spades player.